There is a popular perception that competition law – and competition economics – has failed to keep up with technology markets.
I don’t want to comment on whether I think that’s true but I do want to set out briefly what some of the problems might be.
We’ve come a long way from a farmer tending his orchard and selling apples at the local market. In some ways that’s a shame because we have a pretty good idea of how to analyse any competition problems there. Though even there we can still argue about market definition, about degrees of concentration and about a myriad of other aspects of the competition rules.
And this market is quite a simple one.
Tech markets are typically more complex, and scholarship and decisional practice are trying (struggling?) to keep up.
Network effects have been studied extensively in the last twenty or so years, but I don’t think even Jean Tirole would say we fully understand them.
Two-sided and multi-sided market scholarship is also blooming.
Zero priced markets are now better understood in large part because of the insights of behavioural economics; and a greater focus on multi-sided markets and the uses of consumer data means that the “attention markets” aspects of zero priced consumer markets are at least recognised.
Potential competition remains a perennial problem, but raw experience might suggest that the malleability, adaptability and extensibility of software code makes potential competition a more proximate force in the online world. Though this may cut both ways – there may be fewer competition problems because potential competition is a more significant constraining force, or there could be more competition problems because acquisitions of not-currently-competitors are capable of killing off potential competition at an early stage.
The interdependence of data-driven products – or, more accurately but less pithily, the reciprocally beneficial information flows from related products – is also a factor. Although businesses offering related products have always sought to use information gained from each product to benefit the production and sale of the related products, tech markets might make the reciprocal information flows more common (leading to feedback loops / virtuous circles of information) and also accentuate the significance of the flows to an extent that may affect the competition analysis.
None of these factors is unique to the tech world, but when several of these factors are combined on a particular market, analysis gets more complex and older precedents less useful (and indeed may mislead).